Have you made or heard these statements? “Stay away from reverse mortgages!” “I wouldn’t recommend a reverse mortgage.” “It’s the worst thing you could do.” “Reverse mortgages are a scam.” “Don’t do it! Too many things can go wrong.” “Reverse mortgages only benefit the banks.” “The bank owns the home.” “You can outlive the mortgage.” These statements get my ire up because it shows people making these statements don’t know what they are talking about when it comes to reverse mortgages.
Let me give you the facts: A reverse mortgage is a mortgage just like any loan against the home but it has special terms for seniors 62 and older.
- There are no income or credit score requirements to qualify.
- No monthly payments required.
- There is no limitation on how the funds can be used.
- Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
- Social Security and Medicare are not affected because it is a loan.
- Medicaid can still be received with the reverse mortgage.
- Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence.
- The loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership. So they don’t have to come up with the difference if the loan balance is higher than what the home is be sold for as long as they are not retaining ownership.
- At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference.
Just like any mortgage, borrowers still have the title and are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
FHA offers and insures the majority of reverse mortgages known as the Home Equity Conversion Mortgage, or HECM, making it the most highly regulated mortgage available. Lenders are regulated by RESPA (Real Estate Settlement Procedures Act) and HUD (Housing and Urban Development). Funds are guaranteed by HUD. Application and Closing documents include many disclosures, in fact at the time of Application it is required that sample closing documents be provided to the borrowers. Additionally, all borrowers are required to go through third-party counseling by HUD approved counselors.
Fees are regulated and only HUD allowed fees are permitted with no mark-ups. Even though many times they are considered expensive or high the compare to conventional loans, in fact the difference comes down to FHA Mortgage Insurance Premium. You can see a comparison of the costs in my article, “Reverse Mortgage Costs – High or Mythical?”
In the last few years HUD and RESPA have implemented more regulations and protections. And recently HUD has been charging those who have not followed these regulations and even pulled their licensing.
The reverse mortgage has been a life saver for many. According to an AARP report 93% of the borrowers are satisfied. Based on a survey of our borrowers our company has 100% satisfaction. I just talked with one borrower last week who told me the reverse mortgage has made a huge positive difference in her and the one her sister had made a big difference in her life also. (Her sister has now passed away.) One day we received a call from a man who said, “I want a reverse mortgage because since Jim got his, he’s a new man.” Some of my other Blog posts share other stories on how the reverse mortgage has made a difference in the lives of seniors: “Finance Retirement With A Reverse Mortgage,” “Know A Senior Who Wants Security, Independence, Dignity, and Control? A Reverse Mortgage May Be The Answer!” “Reverse Mortgages Finance Home Care,” and “Reverse Mortgages Answers Prayers.”
I’ve posted some Blog articles addressing the media’s attacks on reverse mortgages, “The Media Needs The Reverse Mortgage Facts,” “But Wait, There’s More… Reverse Mortgage Facts The Media Needs To Know,” and “It Is NOT Reverse Mortgage Fraud When…” It’s obvious the public needs these facts too when they make the statements that are in the opening paragraph.
When people make such irrational statements they don’t know what they are talking about. The reverse mortgage is not right for everyone but everyone has the right to get the details and facts so their decision can be based on the truth, not on opinion. As asked in my Blog, “When You Don’t Know What You Don’t Know About Reverse Mortgages,” would you go to a plumber for health problems? And to expand on that, would you go to a general practitioner if you have heart problems? No, you would go to the specialist. So before making or believing such irrational statements, contact a specialist and get the facts. Our website, www.RMSIDAC.com is full of information and facts and if you are in Minnesota we’d love to provide the facts for you via phone or in person.
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Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.
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